A distant relative of catalase that is specialized for metabolism of a fatty acid hydroperoxide was identified. This heme peroxidase occurs in coral as part of a fusion protein, the other component of which is a lipoxygenase that forms the hydroperoxide substrate. The end product is an unstable epoxide (an allene oxide) that is a potential precursor of prostaglandin-like molecules. These results extend the known chemistry of catalase-like proteins and reveal a distinct type of enzymatic construct involved in the metabolism of polyunsaturated fatty acids.